While Apple managed to surpass analysts' profit forecasts for the fiscal 2013 first quarter, the company's stock took a tumble as investors worry over Apple's ability to maintain steady growth with new products.

Apple reported a revenue of $54.5 billion for the quarter ended December 29, 2012, compared to $46.33 billion in the year-ago quarter. The tech giant just missed analyst expectations of $54.73 billion.

Apple also earned a net profit of $13.1 billion ($13.81 a share) compared to $13.1 billion ($13.87 a share) a year ago. Profit clearly remained pretty flat, but it exceeded analysts' expectations of $13.44 a share.

The iDevice maker also noted that it had record iPhone sales for the quarter at 47.8 million (compared to 37 million in the year-ago quarter). It also had an uptick in iPad sales, from 15.4 million in the year ago quarter to 22.9 million in the most recent quarter.

“We’re thrilled with record revenue of over $54 billion and sales of over 75 million iOS devices in a single quarter,” said Tim Cook, Apple’s CEO. “We’re very confident in our product pipeline as we continue to focus on innovation and making the best products in the world.”

While Apple did okay for the quarter, investors are concerned with the company's flat profit due to higher manufacturing costs and also worry whether Apple can keep up its momentum with product popularity. Many new devices are hitting the market at lower prices and offer newer, better features. For instance, the iPad's market share was bested by Google's Nexus 7 tablet in Japan mainly due to cost differences.

Apple's stock has lost nearly 25 percent of its value since September 2012 ($170 billion in market value).

In after-hours trading today, Apple's stock fell over 10 percent.

Looking forward to fiscal 2013 second quarter, Apple expects a revenue of between $41 billion and $43 billion.

I guess those who think share price was meaningless when Apple shares increase in value will now think that a fall in share price has great meaning.

Meanwhile in the real world.............

17.7% overall growth

iPhone sales up 39% per week (the per week comparison is necessary because the year ago quarter had an extra weeks of sales included)

iPad sales up 60% per week (and the iPad Mini was very supply constrained)

Mac sales down 16% per week (but new iMacs only started shipping in December and remain supplied constrained)

iPod sales down from 15.4 million to 12.7 million with the iPod Touch running iOS representing 50 of sales.

Cash on hand is an astonishing $137 billion

China: revenues up 67%, iPhones sales up 100%

Net income flat at $13.1 billion, just ahead of amount generated in last year's 14-week quarter.

Total iOS sales for the quarter 76 million. So iOS sales now more or less the same scale as Windows sales. the iOS installed base is now 500 million and will be a billion sometime in the next eighteen months or so and surpass the shrinking Windows installed base. Shame Steve's not around to see that.

So what does all this mean?

It seems to me that there are probably three possible scenarios for the future

b) Apple continues to grow but margins squeezed way down. Apple starts to look more like an anaemic Android OEM or and old style PC OEM.

c) Apple continues to grow, margins may creep down but remain strong. Apple becomes much bigger and vastly larger than almost any of the other tech companies except possibly Samsung and it's cash mountain means almost nothing can capsize it.

I think (a) is unlikely and somewhere between (b) and ( c) is far more likely. Given the vast scale of the global mobile device markets and Apple's sustained push into the Chinese markets I think Apple can sustain strong profitable growth for years to come, the new mobile markets are nowhere near saturation. Apple will almost certainly become a $200 billion a year company sometime in the next year to eighteen months and will grow beyond that.

Apple appears to be the only company to have made a successful transition from the PC market to the mobile device markets, and done so in a way that builds a growing and profitable business in the long term.

I think the mostly outcome is that the dominant computing platforms in the next decade will be iOS and Android, with Windows left trailing. Android and iOS will coexist and the different rates of platform utilisation between the two will mean that although more Android devices will be sold the dominant platform will remain iOS for quite some time and the profits in the mobile markets will continue to flow primarily to Apple followed closely by Samsung, everybody else will scrape by or exit the game.

With Apple firmly on a sustained growth and profitability path the most important question in the next two years is what happens to the relationship between Google and Samsung.

Actually out of all your scenarios (A) is the most likely. Kantar Worldpanel just released figures that put Android at 75% global smartphone marketshare in Q4. Apple actually had slight declines in their two strongest markets in Q4: USA and UK (but they grew in China to make up for it).

There is one overriding factor that everyone seems to overlook: nobody can compete with Android as long as Google continues to give it away for free (along with a host of other free services). This article sums it up: http://gizmodo.com/5785983/android-may-be-the-grea...

I don't know what causes people to underrate Windows Phone so much. It's a solid OS (coming from android), that brings things to the table that neither of the other two do. I don't think it's perfect, but the argument of being "too late to the party" is silly. RIM and win mobile were as firmly entrenched into the market that the iphone stumbled into as android and iOS are now that WP8 has come into it. I don't think WP8 will have 80% market share in 4 years or anything, but it's a solid, competent competitor.

Also, you're completely missing the point of the article (I believe).

If I sell 100 lollipops at a dollar each, and it takes a dime to make them, I make 90 dollars.

If next year, I sell 115 lollipops at a dollar each, but it takes 20 cents to make them, I'm only making 92 dollars. I've experienced growth (15%), but I'm hardly making any more money. Growth is great for market share, but it means nothing for profits if manufacturing costs offset it.

quote: If I sell 100 lollipops at a dollar each, and it takes a dime to make them, I make 90 dollars.

If next year, I sell 115 lollipops at a dollar each, but it takes 20 cents to make them, I'm only making 92 dollars. I've experienced growth (15%), but I'm hardly making any more money. Growth is great for market share, but it means nothing for profits if manufacturing costs offset it.

Ding ding, nailed it.

iPhones cost more to make than the previous model, offsetting how increasingly popular they are. The popularity of the lower profit iPad Mini eating into regular iPad sales is also to blame here. I don't think that'll go away either, not when iPad Minis will eventually double display resolution, keeping its profit margins low.

A massive increase in revenue ($55BN, wtf) with a reduction in margins resulting in the same profits as the prior year is a negative thing.

Looks like they won't be reaping the rewards of the iPhone until the 5S comes out. The exact same thing happened between the iPhone 4 (reduced profits on new hardware) and the iPhone 4S (increased profit on mature product).

I know I am not alone in my sentiment about Win Phone, and that is that it may well be a very good OS, but it is taking some of the things I hate most about IOS (locking it down, not allowing other app stores, etc) taking about my choice. I don't want somebody to tell me what I can install, from where. I want to be able to do what i want with my device when I want to do it. Due to that, I would probably go to an idevice before MS since they at least have a good app library.

quote: There is one overriding factor that everyone seems to overlook: nobody can compete with Android as long as Google continues to give it away for free (along with a host of other free services).

Rubbish.

First off Android really isn't "free." Each and every Android phone producer writes a check for every Android handset they sell. That's not free.

Secondly, the price of an OS in the smartphone market is beyond irrelevant. All smartphones are the same price at launch and the price is based on the hardware not the software. Neither Apple, RIM, nor Google technically "sell" an OS. In fact the only player out there selling an OS is Microsoft. Are WP8 devices more expensive than Android devices because of that? Nope.

Third, nobody can compete? Apple is competing pretty damn well and if Microsoft didn't have an absolutely moronic mobile strategy they would be competing just fine too. This market is in its infant stage right now. No one has won.

A lot of people are going to be quite surprised by how well the Windows Phone especially the Nokia 920/Windows Phone is doing globally despite there being two other established eco systems from Apple and Google.

quote: here is one overriding factor that everyone seems to overlook: nobody can compete with Android as long as Google continues to give it away for free (along with a host of other free services).

I guess that must be why all the Android OEMs bar Samsung don't make any profits and why Apple just delivered in the last year the best annual profit earnings of any company in the history of capitalism.

What's actually so astonishing is that even with Android being given away free, and hence almost all OS development costs removed from their bottom line, the inept and blundering Android OEMs can't even scratch a profit. Only Samsung is a worthy competitor of Apple and even they can't seem to match Apple's performance.

Some of those are gimmicks, others are simply untrue. Google Maps and Google Voice Search on iOS are actually better than what is on JB right now, but that will obviously close up once those apps eventually get ported over. Other things are BS, things like "plays HD content" (video scalers, do you now understand how they work?). Other things like Photo Sphere have been in iOS apps long before it was on Android, and things like mounting as a flash drive has been available via apps for years.

Most of these features tie into larger chassis, and that is purely personal preference. For every person who likes big phones, there is someone who thinks they are impractical for a portable device. That comes down to personal choice, not objective advantage.

Notice how the Nexus 4 doesn't have replaceable batteries or SD cards, despite being a really good piece of hardware? This isn't a "feature" issue, lots of trash phones can do those things. This is an engineering issue, there simply isn't the room for the mounting for those things. The iPhone is a much smaller device, barely enough room for RAM that is soldered in. Of course a giant phone can continue to have swappable memory or batteries, that's what happens when size isn't a practical constraint and you don't care about portability.

The single thing you're correct on are multi-user support for tablets, that's something iOS has needed for a long time now.

"The single thing you're correct on are multi-user support for tablets, that's something iOS has needed for a long time now."

You know, I am getting tired of this. You are so full of crap its not even funny anymore. Some of what you said about gimmicks from a certain perspective is true. Let me pair this down to undeniable things your little toy phone is missing. There isnt a damn thing you can say aboout this list, and dont give me any crap about how your little 4 inch scren is better quality than some of the modern 1080p screens with 440+PPI.

Still a bunch of gimmicks and things you only get from big phones, and not everyone wants a big phone. The Nexus 4 is missing user replaceable parts because of its size and people still love it. Hell, my KINDLE dropped user replaceable parts years ago and was improved by it. Other things like mini-HDMI, whatever, that's what Miracast and AirPlay are for. Get with the times!

For someone who talks a lot about "choice" you certainly seem to think that "comically huge" is the only way people should go.

I always frame it like "if you want a big device and are fine with the negatives they come with (slower hardware, inferior third party apps, inferior support), there are some good ones out there and you should go buy them". I don't care for the GS3 at all, the screen sucks, but the Droid DNA is a super nice piece of kit. I wouldn't hesitate for a moment to recommend it to someone who wants a big Android phone.

You seem to think there is only one way to go, and it doesn't revolve around applications, battery life, or performance, just chassis size.

Get out of that mentality, not everyone wants the same thing. Its all about choices, right?

I agree its about choices. Its just that there are alot better choices available on android these days. And no its not all about size, its also better res, higher DPI etc. I can say the same right back at you. the few things the iPhone does well arent all that matters to everyone... Choices.

Higher DPI once you get past 300 (250 really) is a questionable improvement. You already cannot distinguish individual pixels in those cases, except now with 440 PPI you're putting an even bigger strain on the GPU hardware to render things smoothly. That's something 4.1 still has issues with compared to iOS and WP7/8. Increasing pixel count for no practical gain is not an advantage.

And again, I've said repeatedly that the things the iPhone does well (performance, apps, polish, support, battery life) aren't for everyone. If you want bigger screens, keyboards, removable batteries, sideloading, and tinkering with your homescreen, then Android is clearly the choice for you. I've never said otherwise.

Hell, I've recommended Windows Phone for years, long before it became "cool" to do so with the newer Nokia devices. I think in many ways it has the best mobile UI out there, and the only thing holding back applications are the number of users it has. Its SDK is better than anything else out there.

"Higher DPI once you get past 300 (250 really) is a questionable improvement."

Not true... 440+ is overkill, but on a 4.5-4.8 inch screen, PPI is starting to get a bit low... A 5 inch screen after 1280x720 they could have gone with 1600x900 and been fine, but the LCD makers went to 1920x1080, so it is what it is. What else it is, is an advantage. Its higher res and its better DPI on a better screen. That is superior x 3. Anything you say to the contrary is a cop out and you know it. :P

"And again, I've said repeatedly that the things the iPhone does well (performance, apps, polish, support, battery life) aren't for everyone. If you want bigger screens, keyboards, removable batteries, sideloading, and tinkering with your homescreen, then Android is clearly the choice for you. I've never said otherwise."

Yup... It does have the best GPU in the industry... Too bad it does no good on anything but games, and phones/tablets absolutely suck for gaming.

Overall, I do say this about the iPhone, it has a very impressive speed/size/battery ratio. For a device that fast and that thin, the battery life is fantastic... Slightly better app support as well. Unfortunately it lacks everywhere else.

But it hasn't really turned, they sell more than ever as quickly as they can make them. It costs a hell of a lot more to make an iPhone 5 than it does an iPhone 4S, that's the real difference here. Their quarterly revenue exceeds what they made in an entire year just three years ago, but when margins on new process then obviously net profits are going to be hit.

Similar things happen when Intel or AMD switch over to a new process, it is inevitable, and the "tock" revision is where they reap the benefits. Same thing happened between the iPhone 4 and the 4S.

Tell us what we really want to know. How does it feel now that 34% of your paper wealth in this company has evaporated in about 4 months?

That _was_ you bragging about buying this stock for a few bucks back in the 90's wasn't it? If you enjoyed crowing about your profits these past 4 years, please do update us on your position these past 4 months.

And please spare us your usual smug deflections, e.g. "Don't know what you're talking about--I'm still up >100x since June 1997. --sent from my iPad in bed, while rolling in 34% less Benjamins."

Without a shadow of a doubt it will be A, unless Apple is able to make some radical tech advances over the next couple of years.

Apple won't be able to command the prices they do if they continue to lag behind feature wise and they sure as hell cant expect to capture much of the emerging markets with such a high price. So either they are going to be satisfied with a 10-15% market share or they are going to have to have deep cuts into margins in order to compete. Either way continued growth on the phone side is doubtful.

Tablets are another story, the question that will get answered over the next couple of years is if Tablets truly can become PC replacements or if Hybrid Laptop/Tablets will supplant them instead. To me that's too early to call and definitely too early to rule Microsoft out.